- Buying a Condo
- Your First Home Purchase
- Finding the Right Home
- How to Apply for a Home Loan
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| Home Moving & Real Estate The Organized New Home Finance Is Buying a Condo to Live in a Good Move?
New Home FinanceIs Buying a Condo to Live in a Good Move?
A condo can often be a good starter home especially if you don't care for maintenance but still want the appreciation of ownership. Here you'll learn everything you need to know about buying a condo.
The answer to that question is yes and no. There are a number of reasons why this is so. Your lifestyle is one of the main determining factors whether it will be a good choice for you or not. It could be a good choice if you like to socialize because there are usually plenty of activities where you can meet and socialize with the other residents along with amenities (swimming pool, tennis courts, etc.) you probably would not have in your single family residence.
Another plus is that all of the upkeep on the exterior of your home is taken care of so you don't have to worry about cleaning gutters or painting. The grounds maintenance and landscaping is also taken care of, including clearing snow. This is a real plus if you travel a lot because you don't have to worry about any thing happening to your exterior or landscaping. Many condo locations are in areas that are very desirable such as close to the ocean or a lake. Many times a single family residence in the same area would be out of the condo buyer's financial reach. You'll also find that most condo projects are safer due to be fenced and gated with either a gate guard or requiring a key card to open the gate.
Although condo living is very similar to apartment living a condo is an investment and will appreciate just like a single family residence. Condo will usually give you more living area for your money as the price per square foot is lower than a SFR. Many times the interior amenities are also superior. Due to the fact that condo values usually lag behind single family residences so even when single family residential prices are increasing rapidly you can still find bargains in both new and resale condos.
There are also a number of negative features to living in a condo including no outside area that you can call your own. It's all owned by everyone in the project. This means you can't go out and dig around in the flower beds. One of the biggest negatives to a lot of residents is that you have to get permission to do any modifications on the exterior, no matter how small. Things you take for granted are many time not allowed such as a TV dish or possibly even hanging plants from the roof of your patio.
There are HOA (homeowners association) fees every month whether you use the amenities or care about the landscaping. Many times these dues are not enough to do the proper maintenance to the property and then the residents get hit with a special assessment which can totally destroy a household budget. A gripe that many owners have is the HOA committee becomes a clique where the proper attention is not paid to the good of the rest of the residents. I was a real estate appraiser for a number of years and often ran across a instances of that when doing appraisals in a condo development.
Another big negative was that was quite often litigation against the builder or maintenance people due to shoddy workmanship or not completing the project. Sometimes the builder went bankrupt and left the project holding the bag. Another minus is the fact that condo values usually start decreasing in price before single family residence values and at a faster rate. They also usually start increasing in value after single family residences and at a slower rate. Historically condos are usually harder to sell than single family residences.
If you are thinking of buying a condo you need to do your homework, even more so than if you were buying a single family residence. Before you even consider the development talk to as many residents as you can and ask them every question you can think of. The more people you talk to the more you'll learn about the project. Don't believe everything you here though whether good or bad. Try to validate each persons opinion by asking why they think the way they do.
Talk to the manager, president of the HOA or anyone else is a position of authority to find out if there are any special assessments coming up, such as a roof replacement. It's not very pleasant to move in and a short while later find out you'll have to pay a couple of thousand dollars for your share of replacing the roof. Find out the amount of the HOA fees, when they last raised and by how much, giving you an indication of the project's financial condition.
Find how many vacancies there are and what they were caused by. If a lot of the vacancies are caused by foreclosures it's probably a place you don't want to purchase in. One of the problems with foreclosure vacancies is that less HOA fees are coming in and there may have to be a special assessment to make up the money. With regular vacancies the owners of the unit will be paying the dues.
Other statistics you need to know are how many rentals there are and determine what the ratio to owner occupied is. If there are more than 40% non-owner occupied units you may have a hard time getting a loan. Another piece of information that will help you make up your mind if this place is for you is how many units are for sale and why they're being sold. If other people don't like the project you may not either. Determine if there is any ongoing litigation? Condo projects often seem to be a magnet for law suits. Many times lenders won't lend in a development if there is pending litigation.
Check out the CC & R's (Covenants, Conditions and Restrictions). These are the rules you'll be living by so it would be a good idea to read them thoroughly although they are usually 2 or 3 inches thick. You'll probably find some sneaky little things in there that you hadn't given a thought to. As you can see there are a lot of pluses and minuses to buying a condo and it definitely isn't for everyone, although many people swear by them. For instance if you're gone a lot this is perfect because you don't have to worry about exterior building or yard maintenance. Your place is relatively safe due to the proximity of your neighbors. When you come back home all you have to do is relax. On the other side of the coin if you like puttering in your yard and keeping to yourself, you probably won't be too enthused about condo living.
If you really want to be sure of what you're getting into with a condo you might think about doing a lease with option to purchase instead of an outright purchase. Try not to put much down for an option fee, try to get rent concessions and make the lease term short. If it turns out that condo living doesn't really turn out like you wanted, you can just walk away at the end of the lease with no further expense. Condo is short for condominium and is described as a development where the owner of a units owns the interior of his unit and everything else is owned by all of the residents as a percentage of however many units there are. A townhouse is similar except the owner also owns the land that the unit sits on.
Don A Levy